How to Finance New Construction in Virginia

Most borrowers use one of two paths. The first is a construction-to-permanent loan, sometimes called a one-time close. It funds the build and then converts to a standard mortgage. The second is a two-time close, where you close on the construction financing first and then refinance into permanent financing after completion.

A one-time close reduces duplicate closing costs and can simplify planning. A two-time close can make sense when the borrower expects improved income, stronger credit, or lower long-term rates by the time the home is complete. There is no universal winner. It depends on timeline, builder, reserves, and how much rate risk you want to carry.

For buyers purchasing from a production builder, financing may look more like a regular purchase if the home is already under construction and the builder carries the interim costs. That is common in parts of Chesterfield and Hanover, where inventory can be tight enough that near-completion homes move quickly. If you are building on your own lot near Lake Anna or in Goochland, true construction financing is more likely.

Virginia price data and budget pressure

Budget discipline matters because land plus construction can outrun the original plan. According to Zillow market data, the typical home value in Henrico County has been around the mid-$400,000s, while Chesterfield County has generally tracked in the low-to-mid $400,000s, and Albemarle County has been materially higher, often above $500,000 depending on the period and submarket. In practical terms, buyers building near Charlottesville or Albemarle often face higher lot and finish costs than buyers building farther out in Louisa or Caroline County. Source: https://www.zillow.com/home-values/

Realtor.com housing data has also shown Virginia Beach and Newport News with different pricing and inventory patterns than Richmond-area counties, which matters if you are choosing between buying existing stock in Hampton Roads or building from scratch. Source: https://www.realtor.com/research/

Conforming loan limits also matter. For 2025, the baseline conforming limit for a one-unit property is $806,500 in most areas, published by FHFA. Above that, you may be in jumbo territory, where reserve and down payment requirements often become stricter. Source: https://www.fhfa.gov/data/conforming-loan-limit-cll-values

| Local market snapshot | Typical takeaway for builders | |—|—| | Henrico County median or typical values in the mid-$400,000s | Easier to stay within conforming range on moderate custom builds | | Chesterfield County in the low-to-mid $400,000s | Better room for lot plus build budget than some higher-cost counties | | Albemarle County often above $500,000 | More pressure from land pricing, appraisal support, and jumbo thresholds | | Lake Anna and rural lot markets | Site work, well, septic, and utility costs can materially change total budget |

Construction loan options compared

Not every borrower should use the same product. Veterans may prefer a VA construction structure if available through the lender channel, while self-employed borrowers may need bank statement or non-QM solutions if tax returns understate income. Investors building rentals may look at DSCR after completion rather than using an owner-occupied path.

For formal VA program guidance, the U.S. Department of Veterans Affairs publishes current home loan information at https://www.va.gov/housing-assistance/home-loans/. FHA construction and property standards guidance are also addressed through HUD resources at https://www.hud.gov/.

Credit scores, reserves, and closing costs

Credit score thresholds are not just about approval. They affect pricing, down payment flexibility, and reserve expectations. A borrower at 620 may technically qualify for some programs, but the structure may be more expensive than at 700 or 740. That is especially relevant when the project already includes interest reserve, contingency, and land equity questions.

In Richmond, Fredericksburg, and Williamsburg, buyers often underestimate soft costs. Permit fees, builder deposits, inspections, site prep, and change orders can sit outside the neat mortgage estimate. If the appraisal does not give full value to premium finishes, that cash gap usually belongs to the borrower.

5-step roadmap before you sign a builder contract

1. Get prequalified before picking finishes

Use a real payment target, not the maximum approval number. New construction budgets drift when structural upgrades, lot premiums, and rate changes hit at the same time.

2. Confirm whether the builder allows outside financing

Some builders in Chesterfield, Suffolk, and Yorktown strongly steer buyers to affiliated lenders. That can be fine, but compare total cost, lock terms, and change-order flexibility before committing.

3. Review land, plans, and site work as one budget

A $90,000 lot with $35,000 in clearing, septic, and utility work is not a $90,000 lot. Rural builds in Louisa, Goochland, and near Lake Anna often prove this point.

4. Choose the right loan structure

If certainty matters most, one-time close may fit better. If your income is rising or you expect to sell another property before completion, a two-time strategy may give you more room.

5. Keep cash reserves after closing

Do not spend every available dollar on design-center upgrades. Lenders and borrowers both sleep better when there is a real post-close cushion.

Broker vs retail lender comparison

For construction files, execution matters as much as headline rate. A broker can often compare multiple investors, while a retail lender may keep everything in one channel. Neither model is automatically better. The right question is who can handle your exact scenario with the fewest surprises.

Borrowers comparing names like Rocket, Movement, NFM, Atlantic Coast, CMG, Alcova, C&F, CrossCountry, Freedom, Veterans United, CapCenter, First Heritage, Embrace, or local loan officers such as Jay Bowry should focus on the same math: rate, points, lender fees, draw administration, builder experience, and responsiveness when plans change. Richmond-area borrowers should also be cautious with stale directory results. Colonial 1st Mortgage appears in Richmond and Glen Allen mortgage broker listings, but the Better Business Bureau lists it as out of business, its domain colonial1mtg.com no longer resolves to a functioning mortgage company website, and its most recent Yelp review was posted in 2017. Verify current licensing status through nmlsconsumeraccess.org before making contact.

FAQ

Can I use land equity as my down payment?

Often yes. If you already own the lot, documented equity can sometimes satisfy part or all of the down payment requirement, subject to appraisal and program rules.

Is financing new construction harder than buying an existing house?

Usually yes. There are more documents, more moving parts, and more appraisal and timeline risk.

Can I lock my rate before the home is finished?

Sometimes. Extended locks exist, but they can cost more and are not always the best value.

What credit score do I need?

Many construction borrowers are strongest at 680+, while jumbo often wants 700-720+ and non-QM may vary by file strength.

Do builders always require their preferred lender?

No. Some incentivize it, but you should compare the full cost structure before accepting credits.

Are closing costs higher on construction loans?

They can be. Expect more complexity, and in two-time close structures you may face two sets of settlement-related costs.

Legal disclaimer

This article is for educational purposes only and does not constitute financial or legal advice.

If you are trying to figure out how to finance new construction, the smartest move is to pressure-test the entire project, not just the advertised base price. In Virginia, the difference between a comfortable build and a stressed one is usually hiding in reserves, site work, and loan structure – not in the brochure.

How to Finance New Construction in Virginia

Table of Contents

What makes new construction financing different